New Delhi: The Securities and Exchange Board of India (SEBI) has proposed an automatic approval route that would let recognised stock exchanges and depositories undertake specified related activities and deploy funds without seeking the regulator's prior permission, under a consultation paper issued on October 22, The Hindu BusinessLine reported.
At present, market infrastructure institutions (MIIs) need SEBI's prior approval for activities involving deployment of funds or otherwise, except treasury investments made under a board-approved investment policy — a requirement the regulator says adds to the approval burden regardless of an activity's size or risk, Outlook Money reported.
Source: Outlook Money — Sebi Proposes Automatic Approval Route For Stock Exchanges, Depositories
Under the proposal, two categories would qualify for the automatic route: activities related or incidental to an MII's core securities-market functions — including those done at SEBI's direction, intra-group share transfers and deployments by operating subsidiaries from their own operational funds — and similar activities carried out through an investee company regulated by another Indian financial-sector regulator, where SEBI has previously approved the activity and it remains unchanged. Recognised clearing corporations are excluded, according to the consultation paper summary.
Source: SEBI consultation paper (via TaxGuru) — Automatic Route for Related MII Activities Proposed
The money involved would be capped: aggregate deployment in a financial year could not exceed the lower of 5 per cent of the MII's net worth at the end of the preceding financial year and its regulatory minimum net worth, and after any deployment the MII's net worth must remain at least 1.5 times the prescribed minimum, The Hindu BusinessLine reported.
Safeguards proposed include governing-board approval for each activity or deployment, board-approved standard operating procedures, arm's-length arrangements for sharing brands and resources, measures to prevent conflicts of interest, and half-yearly reporting to SEBI. Activities that do not qualify would continue to need prior approval, according to the paper.
Source: SEBI consultation paper (via TaxGuru) — Automatic Route for Related MII Activities Proposed
SEBI has invited public comments on the proposed amendments to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and the Depositories and Participants Regulations, 2018 by November 12, 2026. These are proposals at this stage, not operative changes.
Source: Outlook Money — Sebi Proposes Automatic Approval Route For Stock Exchanges, Depositories